Yes. Housing Benefit and Local Housing Allowance (LHA) are pretty much the same, the only difference is, those tenants claiming housing benefit from a private landlord since 7th April 2008 will be doing so under the Local Housing Allowance.
The benefit system is in a period of transition and if the Government manages to pull it off, all six types of means tested benefit, including the Housing Benefit / Local Housing Allowance will be placed under the single banner of Universal Credit. The Government hopes the new single payment benefit system in place by the end of 2017, but this deadline seems optimistic.
The idea behind the Universal Credit is to make it so no claimant will be worse off by working and claiming benefit, than if they purely relied on benefit payments. The jury is still out as to whether the new system will even work. The payment of all of a tenant's benefit in a singular payment also has many landlords concerned over increased levels of rent arrears caused by poor household budgeting. Landlords watch this space.
The Local Housing Allowance (LHA) has had a patchy reception from landlords following its introduction in 2008. This largely resulted from the way that it handed discretion to the administering local authorities as to whether a landlord received direct payments to cover the rent or the allowance was paid directly to the tenant. When the latter situation applies a landlord is clearly reliant on the tenant using their money to pay the rent, and many of us know from experience, that this doesn’t always happen!
Calculating the amount of housing benefit a tenant is due is quite complex. Under the Local Housing Allowance, the figure depends largely on the number of bedrooms, and the area in which a property is located. There are a number of useful websites that give you details of the amount of housing benefit that your tenant might be due, such as on the Shelter website and this Government site.
The level of housing benefit depends on the location of the property within a series of areas called Broad Market Rental Areas (BMRA) which are each listed in the Valuation Office (government agency) website LHA Direct.
A Broad Rental Market Area is defined as an area within which a person has reasonable access to health, education, recreation, banking and shopping facilities. These facilities are collectively known as HERBS which stands for: Health, Education, Recreation, Banking, Shopping. In otherwords what in America would be known as a neighbourhood. The BRMA assessment is made when taking account of the distance of travel by transport both public and private provision.
Designation of a BRMA is subject to two conditions:
1. It must have a sufficient mix of residential premises and tenures &
2. In the opinion of the rent officer it should have adequate number of premises in the private rental sector to be able to determine a Local Housing Allowance (LHA) that is representative of the rents that a landlord might be expected to receive.
Since the Local Housing Allowance (LHA) was introduced, landlords no longer automatically obtain rent from the Local Authority. They can do, but only under certain circumstances; for instance where the tenant is over 8 weeks behind on paying the rent, or where the Local Authority considers that the tenant has problems paying because of a drugs, alcohol or a medical condition. Local Aothority may sometimes pay the rent direct to a landlord if the tenant has a history of consistently failing to pay rent.
The Government introduced changes to the guidance to Local Authorities on paying LHA that grants them greater discretion on how they make direct payments. They now are allowed to pay the landlord directly if the rent has been reduced to an affordable level by the landlord for existing tenants, or if the rent has been reduced for a new tenant, or if they believe direct payments will help a tenant keep hold of their tenancy. There is considerable variation across the country in the way Local Authorities actually implement this guidance over Local Housing Allowance (LHA) payments.
One way for a landlord to ensure they receive rental payments if they are concerned about a tenant's ability to pay is to obtain a tenant guarantor.
With the introduction of the Local Housing Allowance (LHA), landlords who'd built a significant property portfolio on the strength of acquiring lower value property to rent to benefit tenants, were suddenly left with the realisation that the Local Authorities were no longer going to pay them direct. This goal shifting change has put uncertainty into much of the benefit rental sector. The way each Local Authority operates is very different, so those new landlords considering entering this market should do his/her research into how their council works before investing.
Post financial crash austerity measures have also had an effect on Local Housing Allowance (LHA). The Government has sought to reduce its overall benefits bill, and with the pensioner lobby holding such a strong voting card much of the austerity has been targeted on the Housing Benefit budget. They have already reduced Local Housing Allowance payments for tenants under 35 and reduced payments for tenants with spare bedrooms. They may well be targeting even younger tenants soon by restricting or even stopping LHA payments to tenants under 25.
More change, brings more uncertainty, and landlords can no longer rely on the index linked direct rental payments that they once could. Whilst potential rental yields for benefit tenants may be relatively high compared to other rental types, the actual rental yield on these properties when rental voids, repairs and damage are taken into account may no longer make this rental sector as attractive as it once was.
When the returns are looked at as a whole, factoring in potential growth in the value of a property the higher yield may not out compensate for the a lesser capital growth that might be expected from a property in a a less prosperous / fashionable residential area.
FORMS FOR LETTING PROPERTY
FINANCE AND TAX ON RENTAL PROPERTY
RENTAL PROPERTY REGULATIONS
FURNITURE AND FURNISHINGS
HMO (HOUSE IN MULTIPLE OCCUPATION)
TENANCY DEPOSIT SCHEME (TDS)
ENERGY PERFORMANCE CERTIFICATES
COMMUNAL HEATING REGULATIONS
INVESTING IN BTL PROPERTY
A GUIDE FOR NEW LANDLORDS
WHICH PERIOD OF PROPERTY
BUYING OFF PLAN
KNOWING THE RISKS
PROPERTY INVESTMENT CLUBS
MANAGING RENTAL PROPERTY
GIVING NOTICE TO LEAVE
NON - PAYMENT OF RENT
GETTING YOUR MONEY BACK
THE TENANT WONT MOVE OUT
THE TENANT DOES A BUNK
RAISING THE RENT
REDUCING THE RENT
REPAYING THE TENANCY DEPOSIT
FAIR WEAR AND TEAR
MOULD AND CONDENSATION
MAINTENANCE OF A RENTAL PROPERTY
LETTING RENTAL PROPERTY
TEN STEPS TO LETTING
WRITING A LETTING ADVERT
FURNISHING A PROPERTY
LETTING AGENT OR DIY
SELECTING A LETTING AGENT
TENANTS ON BENEFITS
LETTING TO STUDENTS
PREPARING AN INVENTORY
RIGHT TO RENT GUIDANCE
TERMS OF A TENANCY
LENGTH OF A TENANCY
RESPONSIBILITY FOR REPAIR AND MAINTENANCE
TENANCIES IN SCOTLAND
LETTING TO TENANTS WITH PETS
LEGISLATION OF LETTING PROPERTY
TENANCY DEPOSIT DISPUTES
ALTERNATIVE DISPUTE RESOLUTION
HOUSING ACT APPEAL DISPUTES
THE LANDS TRIBUNAL
RIGHTS OF LIGHT APPLICATION
APPEALS FROM LEASEHOLD VALUATION TRIBUNALS (LVT's)
POSSESSION - SECTION 8 NOTICE
POSSESSION - SECTION 21 NOTICE
SECTION 21 TIMETABLE AND PROCESS
GROUNDS FOR POSSESSION
PREPARING FOR A POSSESSION HEARING
HARASSMENT BY LANDLORDS
RENT DISPUTES BETWEEN LANDLORD & TENANT
FAIR RENT (RAC)
MARKET RENT UNDER AST
LEASEHOLD VALUATION TRIBUNALS
MODIFICATION OF RESTRICTIVE COVENANTS